Biolargo Inc

Welcome to BioLargo annual fourth quarter 2023 earning results conference call. At this time, all participants are in a listen-only mode. Anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I would now like to turn the conference over to Brian Loper. You may begin.

Great. Thank you, operator. Good afternoon, everyone. Welcome to BioLargo's 2023 annual results conference call. By now, everyone should have had access to the earnings press release, which was issued prior to market open, and the 10-Q report filed at the SEC. This call is being webcast and is available for replay. In our remarks today, we may include statements that are considered forward-looking within the meanings of securities laws, including forward-looking statements about future results of operations, business strategies and plans, our relationships with our customers, market and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today and are subject to certain risks and uncertainties and may cause the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in our most recent Form 10-K, Form 10-Q, and in other reports filed at the SEC. The company undertakes no obligation to update any forward-looking statements. And with that, I now hand the call over to BioLargo's Chief Executive Officer, Dennis Calvert.

Hey, thank you, Brian. This is Dennis. Thank you, everyone, for joining us. We're going to cover quite a bit of territory. I also want to mention Charles Dargan, our CFO, has joined us as well. He'll be presenting some of the financial information and also available for Q&A. So just a real quick review of who we are and what we're doing, right? BioLargo, we make life better. It's a big calling. Focus on purposeful change. innovation to make a change for good, for clean air, clean water, and remember our strategy, invent it, prove it, and partner it. Partner for success. That's a critical component. So who are we, right? Well, safe harbors. Brian covered that. Covered that quite well. Innovators and scientists passionate about doing something important for sustainable innovation and human health, driven by this purpose, for best-in-class solutions, lots of engineering, heavy engineering emphasis, and focus on problems without solutions. We've been doing it now since the first acquisition of the BioLargo technology in the spring of 2007, and we have years of innovation and multiple platforms. We call the BioLargo engine the innovation engine. At the corporate office, we have deep engineering staff join us about five years ago, making significant contribution. Our company up in Canada is now called BioLargo Canada, heavily focused on R&D, recipient of over 100 grants, critical piece of the puzzle as well as we delve into some of these advanced developments for our technologies. I'm not going to cover all the details, but I do want to publish these details so that when you look back to it, you can see some of these notes. But the punchline is Clear Medical is really focused on product launch, and we've recently made some significant acquisitions of capital equipment for our contract manufacturer. Contract manufacturer, very critical. Clear has gone through the regulatory, the design, The complete safety protocol, QAQC, contracts out manufacturing. Very important. Contracts out manufacturing and then builds distribution through relationships. That's that partner component. And we're in the process now preparing for some significance. We've been talking about that for months. It's very close at hand and we're excited about the future for CLIRA. Energy. It's a new technology. We built a small manufacturing facility. We're making cells for testing. We're on a journey there. It's quite exciting. And we've got a number of partnerships that are in development stage. We'll talk about that in a minute. Of course, we can't miss O&M Environmental for our odor and our blockbuster relationship with Poof Inc. They continue to break records, a trend that's astonishing, and the financial results speak for themselves. They're just impeccable. And we heard just the other day they're calling it the fastest-growing odor-controlled product in the world, right? Anyway. Anyway. It's a lot of social media buzz on that product. It's incredible. They've done a great job. And then, of course, our water solutions company, right, BioLego Equipment Solutions and Technologies. This has now brought together all the innovations. We've got first customers in PFAS. We've got a significant robust pipeline. And all of our operating units support that enterprise as it commercializes those technologies. It's arduous, rich, and we think going to be significant. I'll now pass this to Charlie Dargan to talk about the results for the year and some of the commentary on that. Charles, why don't you step in here with me?

Okay, great. Thanks, Dennis. Personally, it's really been exciting times for the company and for me to be involved with the company. So, very excited to be here and it was a great year for us. We had a 108% year-over-year increase in revenue. a doubling of stockholders' equity with very little debt, and our cash balance was $3.5 million. From this chart, you can see the accelerated revenue growth from 2021 culminating in $12.2 million in 2023. And even in the 2023 year, growth has accelerated with the fourth quarter revenue of $4.4 million which was a 64% quarter-over-quarter increase from third quarter 2023. Although we had a net loss of $4.6 million in 2023, it's still a 9% decrease from 2022. The net loss contained 60% non-cash expenses. So from a cash basis, we had a really, really good year. Most importantly, our cash burn has declined dramatically. By a largo, we almost broke even in the fourth quarter, as we're showing right here, and the cash used in operations was really only $2,000. So back to you, Dennis.

Yeah, it's a great summary real quick. And, you know, what's interesting, often people – You have to dig a little deeper, but as you dig into the use of cash, we want to remind people that there's some projects and some business development like Clear Medical where we've accelerated some of the expense and preparation of launch of product in a big way. And it just kind of comes with the territory. Same thing really for, which was primarily financed with outside investment. It's very important. Outside investment is the key. And the same thing for the battery technology. outside investment brought in about a million dollars, just under a million, and we used that money to invest in equipment, some of that's investing activities, some of it's to support a rather nominal overhead in the development phase in preparation of proving out batteries and getting ready for commercialization. So while it expanded, so did the opportunities. That's basically I want to make sure we're covering that concept. Anything else, Charlie?

No, not at the moment. Like I said, it was a great year for us. and the performance as shows it.

Yeah. And then, you know, maybe just a – we believe that the trend of this performance will continue. Now, when we say that, we always have a little caveat. We're into Q1 now. We're not in a position to provide guidance. But what we can say is the trend is continuing. We've had a great first quarter. And there's always a caveat because there's a couple of numbers that we just won't know. We just won't know for another probably 30, 45 days at least. And that's primarily the royalty and the work in process. And those will impact revenue. But what we can say is with that trending and the significant performance in Q4, we would expect a similar type performance, if not more, to continue in Q1 and beyond. Now, we always have that caveat. A lot of the results we don't control, especially when we're partnering with third parties that take product to market. So if they are able to continue their historic trend, like POOF, and they continue that trend from 2022 to 2023 and then 2024, it's going to make just a blockbuster year for Pat Largo. And so we anticipate that trend to continue. Okay. National equity has increased. Now, this is a number, you know, everybody wonders, why do you put this number in? Just remember, when we contemplate the potential uplisting to a national exchange, This will be a big number. This is a very important number. NASDAQ puts that at about 5 million. Also make sure that our burn rate is low as we're demonstrating with improved cash flow as we did in Q4. As revenues climb, the rate of increase of overhead is nominal. We believe it will continue to stay so, and that will give us the ability to continue to accumulate cash and ultimately build net shareholder equity. So, poof, we covered that. Just to remind everybody of the business deal, remember the company was formed by Ikigai Marketing Works. We managed a business deal with a company called POOF to manufacture a product using our technology. We control the manufacturing for them on a cost-plus basis. We get a nominal warranty, excuse me, royalty, and then we participate ultimately in the exit of POOF if it's ever sold for 20% of the exit. They stated their mission to achieve a $100 million run rate, and at that point they would consider some sort of exit And they're on track for that. Last count on our side was close to 10 million, which means that POOF has a shot, if it continues its current growth rate and its stated target at 20% quarter-by-quarter, has a chance to double again this next year. So it's a big part of our business, and we're very grateful for them. They've proven exceptional at their ability to build a brand and compel customers to make a buy decision. POOF's a great product, of course, and it's a wonderful testimony to the science behind the products, and even in the industrial side, right? These are products that work. And POOF's value proposition hinges on the claim that it can completely eliminate odor, completely eliminate odor, dose for dose, when delivered, right, in a proper way. It's going to provide a reaction that breaks down the odorous compounds that won't come back. It's joined many national retail accounts. It's continued to expand. Again, the numbers speak for themselves. New products, the wipes have been launched, and puppy pads were introduced at Global Pet Expo. It's a great little side story. They brought puppies in the booth and put a bunch of puppy pads in the middle of the booth, and everybody wants to pet the puppies. And, of course, the products really eliminate odor in an incredible way. And so this is another great testimony to the long, cycle of innovation at BioLargo that allows us to turn up these products on demand for an existing distribution channel. That incremental innovation is profitable and meaningful in many, many ways. So we're grateful for that. We expect great things from POOF to continue. We wanted to highlight clearer because we've started putting some money to work here. And we did mention this in the K. And again, just want to make sure we're clear. We're working with At third-party, that's contract manufacturing, third-party FDA-compliant manufacturing. That means we're not going to be in the factory business. We're going to be in the contract with the factory business and building through distribution. So our role really focuses on the design, the QA, the QC, the FDA compliance, the position and the training for distribution to take a product to market. We've just committed to about $800,000 that's ongoing worth of equipment that will go on site for a contract manufacturer. I just want to note that the contract manufacturing at this stage for this type of product is also quite significant, and they've made substantial commitments to be able to support what we believe is going to be a significant rollout. It's all in preparation. We're anxious for more news. BioCleanse is the start. BioClear is a wound care product focused on wound care, so that would be like diabetic ulcers, that sort of work. Oraclear is a great product, too. It's not quite ready for market. and there's a menu of additional product designs. We think CLIRA is not only a fulfillment of the original innovation that founded the company, so it's a full-circle story, it also has a chance to be one of the most meaningful impacts and highly profitable operations, so we're anxious to start demonstrating results there. Very active and intense, and so stand by for more information. PFAS. We all know about PFAS. Mostly it's called forever chemicals and everyone seems to have caught on to the fact that PFAS is a big problem. All kinds of words describe it. It's a big problem. And people are starting to spend money. Some early adopters jumped early. Some of them probably regret what they did, but they did jump early. There's a lot of people poised to take action, primarily hinging upon finding a good answer like ours and also upon regulatory clarity And the federal government, through the EPA, has announced that they'll be coming soon with regulatory standards that will be published that will set the case for the Clean Water Act and others. Our value proposition, again, is real simple. I don't want to go deep dive. Happy to do it offline if somebody wants to talk. It's really very simple. Be the most excellent collector. Be the most excellent collector. It works in all kinds of different types of water. It can save money. And where we create... Literally two pounds of waste, the competition creates up to 80,000 pounds. If that material is hazmat, requires special handling and destruction and handling, the cost of managing the waste stream is just literally off the chart. And so our value proposition is efficiency, competitive capex, and extraordinary lower opex. And it just makes a lot of sense. Be the most excellent collector. The work is continuing. Here's a great example. You want a truckload of carbon, or you want a pail full of our spent media, which is that PFAS media that collects on our AEC? Well, the answer is obvious. You want a small pail. If you have a small pail, you can manage it. Cost of destruction, cost of handling is low and manageable. There we go. The pilots have been incredible. They've done it for over seven states, four types of water, including landfill leachate. This is really important. Remember, we've been serving the landfill and the waste handling industry now for almost eight or nine years. We have national accounts and relationships. PFAS for landfills is a big deal. That's some tough water to manage. And PFAS is extraordinarily common in the landfill. And so this is an emerging field of regulatory action. We're doing trials now with some big customers, and our results have been highly encouraging And so we believe that will be an expanded segment for our commercial future for our PFAS solution. Mobile treatment unit, you've seen it before. What is this for? Well, we want to show that this unit can go out in the field and prove to people it works. That's basically it. It can also treat a small body of water. It's a functional unit. And, you know, it's running all the time. It's running all the time, either in our office or out. but really it's the kind of unit that allows us to demonstrate portability and functionality as required. And then this is a scaled unit. The unit on the right is an image of something like a thousand gallon a minute system. I recall that earlier this year we announced our first PFAS project in New Jersey. It is underway, money's flowing, work has begun construction. We're targeting successful installation sometime by November of 2024. So stay tuned for more information on that. Here we go. Our pipeline is robust. We have a big internal debate about what the pipeline means, how much business it really represents. And of course, one of the things we caveat is some of the selling cycles can really be long. These are very large capital projects. We've had projects that have taken six months or a year to get to even to the closing cycle. Some can be even longer. But what's happening for us is the We're stacking them up. So we go through a scoping, sometimes a bid, sometimes not. We try to become sole source supplier. There's all sorts of relationships they're advancing. It's incredibly demanding work. It's active. It's a significant pipeline of business. And we believe it's kind of like a domino effect. What's the big caveat? Well, everybody wants to see skilled deployment. That's number one. Show skilled deployment. You put it in the field. Show me where it's working. Well, that's in process as we speak. That's number one. We're also working with a number of government groups to get sponsorship, to work through scaled, large-scale deployment. And we just remind everybody, you know, these projects, the low end is probably around the half-million-dollar range, which is what we're doing currently. But they go all the way up to the $8 and $10-plus million. So these can be big projects. And so, again, we're in it to win it. We believe we have a winner, and we're experiencing the – the grind of getting adoption in the marketplace, but we have no fear and we're highly confident in what we're doing. And the selling partners. The other, I'll just mention Garrett Callahan real quick. The Garrett Callahan relationship has been great. Slow, long, long process to bring new innovation to the marketplace, but the number of projects and the breadth and size and scope of them is expanding and dramatic. And so again, we're predicting success and we know it's been a long time coming. So both Here at Cali and BioLogger, anxious to get that done. Salinity, this is the brand of our battery tech, and we like it. We think it's a winner, and we've done quite a bit of work since we last spoke with our shareholders. So we'll go through a little bit of that. These articles are in the last couple of days. One is, I want you to point out, this is in Forbes magazine. It's long duration. That's us. Long duration energy storage is key. It's the core to tripling renewals by 2030, meaning you can't do it without it. You have to have a place to store energy to accommodate renewable energy. It has to go somewhere. The grid just can't store it. The grid's going to use it. So storing, balancing the grid, critical piece, it's all over the news. And then this other article, Google and Microsoft seeking technologies. You know, what it really shows is that the customers, the ultimate customers of these batteries are the people that need the battery. Who's that? Big data? Sure. Data centers? Yep. Renewable energy? Yep. People that support the grid? Yep. Utilities, heavy industry, they need the batteries. And there's a thesis we're going to talk about in a minute on what we think a good battery is and why we have a chance to win big here. So lithium is a problem, you know. The fires are real. The risk is high. Thermal runaways, when one fire lights another, cells kind of go off and off and off. It just keeps going. There's a huge global supply. There's an outcry. Some of the geopolitical things are being talked about by politicians and economists globally are impacting this. They'd like to see Made in America. They'd like to see domestic supply. They'd like to see non-rare earth elements be put to work, and the incentives and the things that we've won there are pretty astonishing. Between the IRA and the Made in America tax, they're significant, but there's more. There's more. Anyway, I think everybody knows that, and it's become really visible. So we have a better battery, right? It's funny. People have seen the name. We've called it sodium sulfur. We've called it liquid sodium. sodium battery what we've discovered is that the name is a little tricky because the performance of our battery is so different than traditional sodium sulfur namely in that we can perform an extraordinarily much lower temperature and it fails to you know really give value to the to the to the name so we're redefining that we're figuring out how we fit in a competitive fast-moving world of competition But the punchline is we think it's better. Why is it better? Well, the stats are better. Non-venting, longer-lasting. We've proven up to 10 years. We think it's going to be a 20-year battery. We're going to need to prove that. And we can do it domestic supply, 100% domestic. That's an actual cell. That's a prototype on the right. I'm going to show you, though, that we've made some progress in the production. The stats. I'm not going to go through these stats now. It's too much detail. But I want to show it, and I want it to be published so people can really stack it up. High energy density. right, no loss in discharge. You know, a lot of these batteries, they just sit there and they lose their energy. I mean, it's not okay. And they're also limited in their scope, like lithium, you know, charged to 80%, discharged to 20. You only get 60% of the functional energy in your storage anyway. And a nice high voltage, and then very low, comparable low operating temperature seems to optimize around 160 C, no thermodynamically low risk, no rare earth elements, And the combination make our battery for long duration, fixed-site long duration, energy storage a winner. These are some examples of the various put-ups that the competition does. And we just want to point them out. These are fixed-site batteries and we would compete with those designs. One megawatt hour and a 25 kilowatt hour design. We believe that's where the market's going to rest in that 20-foot trailer design. And so this is industrial scale backup for all sorts of different applications. Now, we're making first sales. When we have a sale ready for testing, which we believe is soon, we'll be holding that up and saying, hey, it's ready for testing. And once it goes out, we'll be validating its metrics for performance. That metric for performance is our desire is to replicate the prior data to be able to stand with third-party confidence that we can present a viable design for commercial scale and scale-up of manufacturing. And that's next. This is all located in Oak Ridge, Tennessee. We put about a million bucks into this, so not $100 million, but certainly real money. And we also have had some staff, and so we've got some people to talk about that soon. We're very excited about the battery, and I'm going to explain that on the next slide. How do you make money with a new battery tech? How do you make money? Well, if you look carefully at the incumbents who's in the battery business, They tend to follow a pretty common trajectory. They spend a lot of money. That's the first thing they do. A lot of money. Maybe they get government support, maybe they don't, but it's a lot of money. It's very capital intensive and it's risky and expensive. And we looked at that and we said, you know, we don't want to do that. We're not going to do that, in fact. So we're going to focus on doing what we do, which is invent, prove, and partner. And so as we went out to the marketplace, two things happened. The first thing is that we had this little factory, this little plant, and we looked at ourselves and said, could we make commercial design batteries here? And the conclusion was yes. And that doesn't mean it doesn't have some hurdles, right, staffing and all that scale. You couldn't make a lot, but you can make commercial design batteries. So we concluded that, and we looked around and we said, these processes, some can be automated, some cannot. But there's a level of automation that can occur. We also look very carefully at the components. And we decided really that the components, the manufacturing of the components that make our battery was going to be the key linchpin to being able to scale up manufacturing. And so then we sat around and we asked ourselves, who wants these batteries? Who needs these batteries? And I wonder if, and we asked the question, I wonder if we could show the world that we had a better battery I wonder who would partner with us to make better batteries for either their own use or for sale. So just like these articles, big data, guys with all the money in the world. They need these batteries to function. They need them to function and expand. And they'll pay for them. And they'll invest in them. And so we really have formulated a model. It's still being formulated. But we're talking with people and we ask ourselves, do we want to sell batteries or do we want to sell battery factories? We think selling battery factories is the business to be in, so that will preserve cash. That means that we're for hire. We help our partner build and operate a battery factory, whether for sale or for their own use, and participate in that on a licensing basis so that we can really exploit our key value, our critical metrics that we can perform at, which is the design, the engineer, implementation, manufacturing, it leverages our core competencies. It also shares wealth, creates extraordinarily high ROI, and then ultimately we scale up for the production of critical supply chain components with a design that we own. That's our battery. We think that model is a winner. And so we've gone out and tested it, and the level of response has been extraordinary. I mean extraordinary. People come to us and say, how many can we build? So there's a lot of chicken and egg there. So we point that out for everyone. First things first, do you have a battery that you've proven to a third-party spec? So that's what we're doing now. Okay, got to get that done. At that point, there are all sorts of questions like, what do you do with off-take? And that's why we point out this third piece of the puzzle, the off-take. What are you going to do with the batteries? Well, if you have enough supply, what you learn is that if you're going to be in the energy business, you're going to need some batteries. If you're in the renewable energy, it's required, especially in California. You can't put up solar without a battery. And we're seeing companies with two-year backlogs in production and purchase order forward commitments for half a billion megawatt hours of batteries. Those are forward commitments in the $300 million and $400 million, $500 million range. Understand that. There's a competitor that's in the space doing a zinc bromide battery. They've got $1.2 billion in standby orders. 1.2 billion. So we look at that and we say, you know, a better battery has a market. And we think it's such a good market that if we can find the right partners, we can exploit it commercially. So this is where we're heading to. And then, of course, there's a marching order, the track to success for that technology. And what do you got to do? Well, you got to make some tests themselves. You got to scale up the tax for commercial spray, make some partnerships, and build out some component manufacturing to ultimately get the scale And we think the market is literally in the billions. And we think that we have a very important role to play. If you do a deep enough dive, what you're going to find out is all sorts of people racing to be in the long duration energy storage business. But so far, we've not seen a battery company with a technical spec that matches ours. So therefore, we're very encouraged. And yes, we have a lot of work to do. So that'll sum it up. We're very excited about, you know, last year was a great year. We're excited about now. and I hope we've provided some clarity here on our financial picture and our expectations near-term and long-term, and I will now turn this over to questions.

Great. Thank you, Dennis. That was terrific. There's been a lot more attention on BioLargo in the recent months, and it's been pretty exciting. We might have some new folks on the call today. I was wondering if we could back up to that six-year revenue chart That is pretty incredible stuff there. And one thing I was wondering if you can clarify is to talk a little bit about the BioLargo business model. It's the parent subsidiary model. You've talked a lot about this cycle of innovation and having a portfolio of cleantech products, you know, having like irons in the fire, these shots on goal, versus a traditional model, maybe just product and services sales. So I wonder if you can just give us a brief history and high level of this past six-year revenue chart and how this unique business model plays into this here.

Yeah, I mean, there's a couple of great examples there. Of course, the odor business is the most vivid testimony of how the business model can function and reward everyone, right, everyone. So the idea, of course, is that if you go back to the history of the company, we first acquired the BioLargo technology. And in that process, we discovered and refined the idea that this chemistry could be used for odor control in a really nice way. And by the way, it has many other uses. It's a platform technology. Odor was one of them. And we said to ourselves, well, you know, we should make some odor control products and see if we can find a market. And It was really hard. I mean, it was really difficult because you're out selling. First of all, what we learned in the other businesses, when you say I've got an odor control product that works, usually people say, yeah, right. They don't believe you because so many products don't work. They just don't work that well. They mask it or they eliminate some of it, but they don't completely eliminate it. It comes back and there's all kinds of stuff that goes on. So we went vertical. We went industrial. We decided that we could probably find more success there. selling average tickets in the $25,000 to $50,000 range as opposed to a $15 model of consumer product. We weren't really well situated, plus we hadn't done the work yet. So as a result of that journey, we became expert in odor, bonafide expert. We also became expert in all the manufacturing techniques, and we built a repository of data to support claims that was beyond reproach. Because of that work, we were able to recruit a partner called Poof, Inc., brought together by the Ikigai Marketing Works team. Poof Inc. came to us and said, we think you've got a billion-dollar product. We said, yeah, we do too. And so in that structure, if you think about it from their side of the equation, they got to pick up a product that had gone through all that development work with all the, quote, hardest, not all the work, but all the hardest work achieved with data to support the claims, and it gave them a head start. They test marketed it. They proved that it had a marketplace for the claims that were being offered. They put their creative umbrella around it, and then they started executing. And when they started executing, because they sort of took the ball and took it from us and said, we'll carry it into the end zone. Let's go, right? And then we could focus on our key value contribution of managing the supply chain, working with claims, doing some creative work, and supporting them in that rollout. And, of course, now the rest is history. You know, that product is – got to be clipping along around $60 million on a run rate basis on their end. That means our revenue for that kind of production will continue to scale up. We generally think it's around 20%, 25% of what they're producing that we believe they will achieve their $100 million plus run rate. And if they stay on target, it could be a lot sooner than people realize. That's an example of a hybrid model where we've invented it, we've proved it, and then we partnered. And through that partnership, we maintained a supply chain role, and we maintained an equity role in the exclusivity, in exchange for exclusivity. And we got a small royalty role to give acknowledgement to the innovation itself. Well, those three revenue streams are compelling. And I always want to remind people, there's also an exit. And the exit can be big. And the same business principle applies to all the assets in our portfolio. They're all built for that kind of business model. And so just as a matter of fact, if you look at the CLIRA model, we think that the CLIRA model, not only is it the full circle story for the company's entire journey from its innovation at inception, you know, well over 20 years ago, the high purpose for healing people, right, protecting people from infection, post-surgical infection control. It's such a high value proposition. It saves lives. So that's one. But number two, the model itself, you can exploit that same kind of opportunity because what we really have done is proven the claim, supported the data, taken it through the journey of regulatory approval, the build-out of manufacturing support, the contracting with third-party manufacturers, the installation of specialized equipment to make it happen, so we're doing now. And then what? Well, then you partner it to significance. Instead of trying to replicate that distribution channel that another company has probably spent 15 or 20 or 30-plus years building, we tap into it with a value proposition that allows for instant revenue and margin recognition for them. And in exchange for that, typically those become long-term partners or potential some sort of right to acquire the company in the future. That's typically how that deal would go. So that's the model. And I think the same thing's gonna happen for the battery tech for sure. I think we're gonna have to do quite more work on the PFAS and water side before it becomes that kind of target.

uh for partnership but that's okay because we can make money all the way through and so we're heading that direction too so i hope that answered the question brian yeah thank you very much um so yeah about poof i mean that's kind of the the star in the portfolio right now um how are things going with proof and what are we anticipating for q124

Yeah, so again, we mentioned this earlier, and so just to repeat, there's caveats on anything that's forward-looking there because we won't know royalty revenue and we don't know some of the work in process for existing orders. What I can say is that the order flow is matching past production and exceeding it. So the order flow. So now depending on royalty and depending on work in process, where that shakes out, we're going to see numbers comparable to the last quarter, if not more. And we think that trend will continue. So they're, you know, the one thing about the team, the marketing team at POOF is they do what they say. And they say our mission is to achieve 20% quarter-over-quarter growth. So everybody can run their own number there, right, quarter-over-quarter growth for the next year. And the financial implications to our company are dramatic. Yeah, terrific. There you go.

Several investors have written in wondering about some or any of other BioLargo products generating revenue.

Well, yeah, that's a good question. You know, in the water and PFAS, right? So PFAS is really a water solution company that includes PFAS is the way to say that. And there's a number of things going on there. We actually represent some products that were manufactured by other people where we've got distribution rights. The idea is to go into a customer and say, how can we help you? And if they say, I've got a need, we've got the knowledge and the talent and the engineering staff to pull that off, whether it's our innovation or not. So we're in the solution business as a way to enter the market. I think it's really good. And so some of that's occurred in the past, which is nice, and some will continue in the future. So that's good. The key focus, however, is to get our technologies launched in that market. The odor control business has a very much diversified portfolio. I mean, they do a lot of things. Missing systems, pumps, service, trailers, trucks. I mean, it's just trucks. It's not forever. Water systems on trucks is a better way to say it. Anyway, there's a lot going on to make money, and that's the things that are ancillary to the ultimate agenda of odor control. And then as evidenced by the incorporation of PFAS for potential treatment of leachate, those become brand, you know, product extensions into a selling portfolio where we already have national corporate accounts. Great examples. where the operations support each other. And then relative to innovation, there's an entire portfolio. It's not that it's not important. We focus on the things that are more immediate and commercial. But as we say, there's at least eight technology platforms in the company, and we're exploiting a handful. And some of those, it's not the right time. There's some work to do. They'll come to us later. But we do believe the nature of our company will allow us to introduce new products over and over and over on a continuing basis. And we're committed to that. We're also always looking at outside technologies to incorporate with ours. A lot of innovators bring their technologies to our company for potential use because we do have some market share and we're really good at that, quote, early adoption phase of doing the grinding work to get it seeded in the market. So anyway, I hope that answers the question.

Yeah, that was great. Another question here, kind of changing gears. When is the New Jersey AEC project expected to start, and when will we begin to recognize revenue?

Oh, that's a good question. You know, it started already, so we're getting deposits, and our target is to install this, as mentioned in the slide deck, by November, November of this year. So that'll all be in 2024. Relative to the quarter-by-quarter revenue recognition, I hate to even spend a lot of time on that because it'll be – whether or not we've earned versus deliverables, and it needs to go through a pretty sophisticated accounting analysis. But if we achieve that target, worst case, we'll see recognition in Q4. So it's in process. And so I don't know, Charlie, you have anything to add to that, or did I get it right?

Sorry, I'm muted.

Yeah, I figured.

Sorry, I'm muted. No, that's correct. Yeah, that's exactly right from an accounting perspective.

So you probably record some deposits and then you'll have a working process. And since the contract is precluded, the provision of the contract is deliver me a working unit. That means you probably can't work revenue until you get that done.

That's correct. So it'll end up in either customer deposits or deferred revenue. And then when we start to deliver on the actual product, we'll recognize revenue.

Yeah. And that process, that accounting treatment is going to, not 100%, but prove be the primary thing that will go on with the water solution company. That's kind of the way it works. Some of these projects will take a year. You know, they're big. And so you'll get deposits and you'll have revenue-generating contracts under your belt, even if revenue doesn't show up yet. So deferred revenue is probably the key metric. But we should have more and more of that as that operation, you know, expands, which is good. You know, ultimately it translates to revenue and profit, so. But it's a lot of work, and that's a business that's not little widgets. These are big, complicated machines, and they solve a big problem. People pay a lot of money for them. And so we think it's a good business, and as we establish ourselves, it'll be worth our investment of time, energy, and money. All right. Go ahead, Brian.

Yeah. Changing gears again. So the CLIRA deal was expected to close in Q1. Yep. Can you say today that your expectation is the deal will close during this month?

Yeah, here's the thing. We don't control a lot of that. We just don't. I mean, that's the trouble. That's the problem with them. You're waiting on a lot of people. I wish we'd picked some better words in the past, right? Because what's clear to me, sitting at this side and watching all this activity is, There's a lot more going on than deciding if you have a partner. What's going on is the launch of significant products. I mean, you know, big scale. And it's a lot of work. And it's an FDA-compliant product going to go into some significant distribution. The energy, the work that's happening is in preparation of that. And it's a lot of work. And so for a small company like ours, that's a big load. And we've been carrying that load pretty nicely. So I'm proud of that. I believe the team at Clear is exceptional. They brought in some incredible talent, highly skilled, highly knowledgeable in their field. It's expensive. It's not cheap. Clear has spent some real money. They're going to spend some more real money. But the reward is amazing, and it will be amazing. And, again, you've got to remember, this is now over 16 years of investings. Excuse me, let me get it right. 13 years of investing, over $16 million. And so to now watch it come to fruition, I think the most important thing we can do is pick really good partners and get it right. And that's what we're doing. We're picking really good partners that are getting it right. So right means ready, ready for the kind of scale we're talking about. So is it going to close this month? We don't actually know. That's really the better way to say it. It could. It could be next month. It could be a couple months. We don't think we're into – a situation where we wonder if we're going to find the distribution that we seek, we believe that's going to happen. So I hope it's soon. So there you go.

Great. Great. All right. So we have a few financial questions here. So if you or Charlie want to take a stab at these.

Sure.

First one is, can you help us understand why 108% increase in revenue only cut company losses by 500,000? in 23 verse 22.

I'd be happy to take a shot at that, Dennis.

Go ahead. Thanks, Charlie.

Okay. So if you look at our numbers, the increase in revenue increased our gross profit. We maintained our margins at the gross level, which is really, really good. And that's about $3.3 million. And then it was offset by an increase in our expenses. SG&A, but also a good thing, we also increased our R&D spending. So as part of that offset, the R&D went up as we're, you know, increasing our battery venture. And then if you look at our other income, you know, it's probably another $300,000-plus that it went down, and that's largely from last year where we had bigger PPP forgiveness and higher or larger tax credit. So if you put that all together, it drives our net loss down by about $500,000. Okay.

Another one here.

Let me just point out there that on the net operating income on the owed operation, which is the most mature operation in the company, let's just make sure we're clear, call it what it is, threw off net cash flow of $4.3 million. It's an astonishing thing. I mean, it's awesome. And that's design by design. It's designed to do that. That's the way the business model works. And so all these others need to do the same thing, reach a level of maturity, find the right partners, get large distribution, and the same type of dynamic will occur for them as well. So it's a great thing, and I think diversity is really critical for the company as well. We're trying to stay within our means. We're leveraging our core competencies. And we're leveraging, you know, opportunities to expand with partners, and it just provides extraordinary return when you get it right. And so that's what we're doing. We'll make sure we get it right. Go ahead.

Great. Another financial question here. Last year, we had an all-time record at Q1 23, but then Q2, we saw a severe drop in revenue. And so folks are wondering if you could give us some color, if we can expect the same type of decline in the coming months here.

Yeah, we talked about this in the past. That was the lumpiness of signing national accounts. Remember, that's when the Walmart rollout occurred. And, you know, Walmart's rollout is notorious for doing what Walmart wants to do. That's the way it works. And so they do it on their schedule and their timing, and everybody plays along. And that's great. Everybody's happy to be there, okay? But that did create some lumpiness because the way POOF needed to prepare for that was to build up an inventory supply sufficient to meet the need at whatever level and whatever time frame was required. And that led to some lumpiness. We also mentioned in prior quarters that that potential could occur again as additional national accounts. I think the dramatic nature of Walmart as one of the first ones and so early in the game for us just highlighted that lumpiness. And we don't see and we don't have visibility currently to a similar sort of performance. So it's hard for us to say it won't happen. I don't know that we know enough to say that. But we don't see it happening. So we can't forecast at this moment. And we don't expect it. Basically, we're getting a leveling out because of the diversity of their revenue base, which is quite good. Got it. Is that the answer? Yeah. Okay.

Yeah, that was great. Final questions. Save the best for last, right? So when do you expect to stop the dilution of shares that we continue to see quarter after quarter? This gets back to generating revenue streams besides poof.

Yeah, I mean, we've curtailed a lot of that so dramatically that that's something to be proud of. And ultimately, it will come down to reaching a point at which excess cash flow exceed our need for investing activities, SG&A associated with fulfilling these business models to the point at which they can cash flow themselves. And so it's a delicate balance and we think we're winning. We're winning on that battle. It's become less and less an issue. But the appetite for growth for BioLargo, there was a post the other day on social media, mediocrity is not part of our DNA. There's no complacency sitting here anywhere. If we wanted to stop expansion and sit back and make all our money supporting a product in a consumer category, I guess we could do that and show a profit. I'm not sure that's going to drive shareholder value the way a battery tech that can disrupt a multi-billion dollar market will do. So we think it's worthy of investment. And we do it carefully and we stretch ourselves, but that careful expansion is really the name of the game for us. Now, the good news is we've got so many at a level of maturity that that can all start to change. So let's just imagine for a minute, let's just imagine for a minute that we get an exit on one of these assets and we pick up a check for 100 million. Did we do something good? Yeah, about $500 million. I mean, you just have to realize that what we're doing here is building out technical assets that will change these markets. And their value proposition is far beyond tomorrow's sale. It's getting sale. It's getting adoption. It's getting partners. And then it's watching these technologies and these game changers change the game. And when we change the game, these issues go away. So, yeah, we're on the right track. And we want to be very careful. I think we've been pretty diligent. People that look at the scope of what we're doing, most often, you know what they say? How could you do so much with so little? How could you do so much with so little? That's what we've done. And so we're proud of it. We're proud of it. And we want to be diligent and careful on the dilution. And I think we are. But it's really critical that we don't give up the one thing that's going to make us shine among all others. And that is that innovation, that thing that we do with innovation to prove it up, find the market, prove it out, partner it out. That's a winner, and we're good at it. So I think we should pursue it. So I hope that helps.

Very good. Yeah, great answers. That's all we have on our side for questions today.

Yeah, let me ask Charlie. Is there anything you want to say in closing, Charlie?

No, as I've said, it's been a great year for performance and generating cash. And on, you know, accounting and finance side, it feels good that we're making significant progress towards getting to cash flow break even. And then I think your dilution issue becomes less and less of a problem.

Yeah, amen. Yeah, and this is Dennis. I want to say to everybody, thank you. The patience has really tested a lot of people. I wish some of this had been faster. It took a long time to get here. We're at a moment in time where we've got some critical mass. As they say, the flywheel is spinning on its own now at some level. And we're credible in ways that we were not before. And that credibility is so critical to find market adoption for some of these solutions. And we've got an impeccable staff. I mean, just it's a remarkable what we are able to do, especially within our, our means, our resources. So we think the future is extraordinarily bright and we're just going to keep marching and knocking down the milestones. And I think this next year will be another record breaker. And I think we're going to see a moment at which these current business opportunities are throwing off a lot of money, a lot of cash, and that'll be very helpful for everyone too. So there we go. Thank you for joining us.

Thank you, Dana.

Thanks, everybody. Talk to you soon.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.